Matthew Lau, Special to Financial Post | June 1, 2017 7:35 AM ET
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THE CANADIAN PRESS/Sean KilpatrickOntario Premier Kathleen Wynne

When former Ontario PC leader Tim Hudak wisely proposed in 2014 rescuing the province’s finances by reducing public sector employment by 100,000 jobs, Premier Kathleen Wynne called the plan “disastrous.” So how then should we describe Wynne’s own plan to raise the minimum wage, which is likely to destroy far more than 100,000 jobs, the vast majority of which will be in the private sector?

On Tuesday, Wynne announced plans to legislate a $15 minimum wage by 2019. By calculating roughly according to estimates in a report commissioned by the Ontario Ministry of Finance when the Liberals were raising the minimum wage a decade ago, we can project the new wage will kill an estimated 80,000 to 155,000 jobs just among young workers (aged 15 to 24), without even counting the number of jobs lost to older workers.

That report, authored by minimum wage expert and University of Toronto economist Morley Gunderson, warned against raising the minimum wage by pointing out that Canadian studies generally estimate that a 10-per-cent minimum wage hike would reduce youth employment by around three to six per cent.

We can therefore expect that Wynne’s plan to hike the minimum wage by 32 per cent would reduce youth employment by around nine to 17 per cent. Multiply that by the number of young workers in Ontario, and that’s 80,000 to 155,000 jobs lost.

Wynne’s Liberals are well aware their minimum wage hike will kill jobs.
But wait: it actually gets much worse. That estimate doesn’t take into account the fact that Ontario’s minimum wage will be much higher than in other provinces. Gunderson’s 2007 report said this would have a negative employment effect “over and above the effect from the higher minimum wage itself.” This extra negative effect is the consequence of employers being encouraged to relocate to provinces less hostile to business.

And remember that the 80,000 to 155,000 estimate is only for the jobs lost by young workers, aged 15 to 24. Add in all the jobs that will be lost by older workers as well, then add in all the jobs that will be destroyed by the other regulatory burdens Wynne is heaping upon workers with new labour rules to go along with the minimum wage hike, and there is no telling how much high the economic casualty toll might skyrocket.

Even current minimum wage earners who do manage to keep their jobs might be worse off if their employers offset wage increases by decreasing non-wage compensation (like job training) that young workers prefer. These negative effects on employment and training are a large reason why, as Gunderson’s 2007 report put it, “minimum wages are, at best, an exceedingly blunt instrument” that could actually end up increasing poverty. [....]
http://business.financialpost......-it-anyway

The owner of a small family business has written an open letter to Premier Kathleen Wynne, warning that she risks shutting down the local food company with her plan to raise the minimum hourly wage to $15 by 2019.

“Putting us out of business is an unintended consequence of this proposed policy,” Jackie Fraser said in an online post.

“Maybe our story — our one small business — is insignificant to you, but think of the cumulative impact of thousands of us closing up and each of us putting a dozen people out of work,” wrote Fraser, who — along with chef husband Derek Roberts — owns Fraberts Fresh Food in Fergus, Ont,.

“Please don’t make us roadkill on the political highway.”

In an interview, Fraser said the company supports 12 jobs as well as local food suppliers and artisans. The business also hosts kindergarten classes to discuss healthy eating, and contributes to numerous local causes like the food bank, a sports teams and school lunch programs.

Since Wynne’s surprise announcement that her government would increase the hourly minimum wage to $14 from the current $11.40 on Jan. 1, and to $15 in 2019, Fraser said she has been anxiously going over the numbers.

Labour costs are 55% of her expenses, and the business is facing an unexpected 22% increase in those costs in just seven months, she said.

“I’m very worried. I’ve been losing quite a bit of sleep,” Fraser said. “I’m mulling things over in my own head and staring at these spreadsheets over and over and nothing’s popping into mind ... I’m just really not sure how we’re going to make this work.”

So far, she’s looking at the possibility of downsizing the retail portion of the business, focusing on catering which requires less staff, eliminating products that aren’t moving quickly, switching to more energy efficient refrigeration and possibly closing one day a week, she said.

“All things are on the table,” Fraser said.

Other small businesses are talking about approaching the government for funding to help them over the hump, she said.

While Fraser said she understands the movement to a $15 hourly wage, slowing down the pace of the increase would help businesses adjust.

“I know there’s discussion amongst other sectors, that they’re going to look for government assistance to get them through this transition but I really don’t want that,” she said. “I would rather government get out of my business and let me run it as I see fit. We’re not looking for a hand out.”

Small Business Minister Jeff Leal’s office issued a statement in response to Fraser’s concerns, saying that the government wants every family to benefit fairly from the province’s growing economy.

“But while business is expanding and creating wealth, not everyone is feeling it,” the statement said. “We need to address the concerns of those who worry about falling behind, even as they work so hard to get ahead.”

The minister’s office said that because the government balanced its budget this year, it’s in a position to introduce a range of measures to protect Ontario workers which includes raising the minimum wage to $15, mandating equal pay for equal work and requiring paid sick pay.

“Our government understands the importance of a competitive business environment, and knows that these changes are going to impact every business differently,” the statement said. “That’s why we’re listening to the concerns of small businesses and working with our colleagues towards striking the right balance — protecting and providing Ontario workers with stability while fostering conditions for businesses to grow and thrive.”

With the exception of its summer student, all Fraberts Fresh Food staff currently make over minimum wage. However, the company would need to see a 12% increase in sales to meet the new salary requirements, when growth averages 3%-4% a year, Fraser said.

The stock market is luvin' McDonalds stock, which has continued its recent relentless rise to all time highs, up 26% YTD, oblivious to the carnage among the broader restaurant and fast-food sector. There is a reason for Wall Street's euphoria: the same one we discussed in January in "Dear Bernie, Meet the "Big Mac ATM" That Will Replace All Of Your $15 Per Hour Fast Food Workers."

In a report released this week by Cowen's Andrew Charles, the analyst calculates the jump in sales as a result of the company's new Experience of the Future strategy which anticipates that digital ordering kiosks (shown above) will replace cashiers in at least 2,500 restaurants by the end of 2017 and another 3,000 over 2018. Cowen also cited plans for the restaurant chain to roll out mobile ordering across 14,000 U.S. locations by the end of 2017 (we did not show that particular math, but the logic was similarly compelling). [....]
http://www.zerohedge.com/news/.....e-its-math

If this becomes a trend, we can expect these kinds of checkout procedures in many other stores. I have already seen them in Walmarts and Save-on-Foods in British Columbia, although in those, you have to use a credit card for the cash part of the transaction.

( there now seeking public input on this plan even though they announced it without really consulting anyone )

Ontario seeks public input on $15 minimum wage

Canadian Press

Monday, July 10th, 2017

TORONTO – Ontario’s bid to raise the minimum wage to $15 an hour – a move that is feared by businesses but has the support of some prominent economists – is being put to the public this week.

The Liberal government’s proposed legislation on labour reforms, which also includes equal pay for part-time workers, increased vacation entitlements and expanded personal emergency leave, starts committee hearings Monday that will travel the province.

The bill would boost the minimum wage, which is currently set to rise with inflation from $11.40 an hour to $11.60 in October, up to $14 on Jan. 1, 2018, and $15 the following year.

Businesses are strongly opposed to the increase, particularly the quick pace of it. A coalition of groups including the Ontario Chamber of Commerce, Restaurants Canada and the Canadian Franchise Association are sending Premier Kathleen Wynne a letter Monday, slamming the “arbitrary” increase.

“Many Ontario employers, especially small businesses, are now considering closing their business because they do not have the capacity to successfully manage such reforms,” they write.

“The business community was wholly aligned with your government’s previous approach, which allowed for increases to the minimum wage that were predictable and protected against arbitrary political decision-making.”

Business groups had been calling for the government to first perform an economic analysis, and have now commissioned their own, which the coalition said will be complete next month.

“To plan effectively and protect jobs, employers need predictability and time to adjust the cost of other inputs where we can,” the coalition writes. “There is no way to absorb and adjust to a 32 per cent hit in less than 18 months.”

Karl Wirtz, the CEO and founder of a packaging company in Brampton, Ont., said he may have to consider bankruptcy.

“This is something that has got me scared out of my mind,” he said.

The minimum wage increase will mean an extra $1 million for WG Pro-Manufacturing’s 200 – soon to be 245 – employees, Wirtz said. About half of them make minimum wage and the rest will have to get commensurate pay bumps, he said.

The company, which does co-packaging for foods and confectionery products, is focused on growth, Wirtz said, and as such is operating within tight margins. He hasn’t budgeted for an extra million dollars a year and is locked into contracts with big customers. The only way he sees out of the pricing structure is bankruptcy.

“I want all of our workers to have a good income and good ability to have a good lifestyle,” Wirtz said. “I respect that. Truthfully, I do. But you have to give businesses an opportunity to phase it into their program. So yes, let’s shoot for $14, let’s shoot for $15, but scale it over the next coming years.”

Economic Development Minister Brad Duguid said the government is sensitive to the needs of businesses, smaller ones in particular.

“We want to ensure there’s not unintended consequences, because these are complex policies,” he said.

“If there’s more work to be done in terms of the details and potential unintended consequences, that’s something we’re certainly happy to do with our business community.”

A recent study out of Seattle made headlines for concluding that its minimum wage increase was actually detrimental to low-income workers. But its methodology has been criticized and it bucks the trend of similar studies concluding the opposite, noted Canadian economist Lars Osberg.

He is one of 50 economists in Canada who just signed a letter in support of a $15 minimum wage.

“For many years, many in the economics profession were also very concerned about this possibility of disemployment of people with minimum wage jobs,” said Osberg, an economics professor at Dalhousie University.

“A whole raft of new studies in the last 20 years have indicated that disemployment effect is very small … On average you could say it’s small to negligible.”

While businesses’ concerns are understandable, he said, studies show that increasing the minimum wage increases people’s purchasing power, as well as consumption and economic activity in general.

“So in that sense it’s stimulative to the macroeconomy,” he said.

Ontario’s legislative committee will travel this week to Thunder Bay, North Bay, Ottawa, Kingston and Windsor, and next week to London, Kitchener, Niagara Falls, Hamilton and Toronto.

Automation is an interesting discussion for some aspects of replacing human labour, however the biggest challenge Ontario faces is just an expansion of a trend we have seen over the last few years with Manufacturing not just moving overseas but to the Southern United States.

Ontario's advantage is two fold to an American employer (Or even a Canadian employer that maintains facilities in both countries);

1) The strength of the US dollar
2) Healthcare is largely provided, reducing the cost of secondary benefits

14CDN an hour is about 10.90USD per hour (1.2873);

The average cost of a healthcare plan for an individual in the US is 321USD (or just under 4k USD a year)

Assuming 40 hours a week,52 weeks a year (2080 paid working hours a year) you are looking at an added benefit cost of 1.85USD per hour not being in Ontario;

While even at a 14 dollar minimum wage Ontario (if we are only looking at labour cost and not the other factors, energy, taxation, etc) they are still some advantages over places like New York, Michigan, Ohio, and many of the traditional rust belt states.

However the area that has received the greatest growth in Automotive production and manufacturing in general are states like Georgia (5.15), Alabama (N/A), Kentucky (7.25), Missouri (N/A) North Carolina (7.25), and South Carolina (N/A).

Even with the benefits adder of 1.85 or even if you wanted to provide insurance for a family of four (9,850 per year or 4.73 per hour) you are still in and around the cost of doing business in Ontario based off the minimum wage alone.

This is also still assuming an exchange around 1.28, as oil recovers or the Economy find other strengths and our dollar increases that gap becomes more substantial.

Granted the majority of jobs in North America are above the Minimum wage; however in Ontario's case going from 11.40 to 14.00 within three months covers a range of skilled and unskilled labour.

While many will get a short term raise;
Ultimately all you are doing is accelerating a trend we are already seeing in business moving elsewhere because its more cost advantageous.

I guess the question I would have for the OLP is if this is an attempt to give voters a short term raise ahead of a summer election or are they betting on a weak Canadian dollar for the foreseeable future?

Last edited by cosmostein on Tue Jul 11, 2017 12:05 pm; edited 1 time in total

As usual, you bring specifics to the table. It's an interesting point -- that health care, in effect, is worth $1.85 an hour. There's also that there's a push for a $15 US minimum wage across the US, which is already scheduled to come into effect in California, and I'd bet that New York isn't far behind.

These things will help reduce the impact of the artificial raise.

But there is a longer-term view. Ontario has been a left-wing hotbed since the end of Bill Davis government. Think about it -- since the Bill Davis government, the left, whether the Liberals or the NDP, have ruled Ontario in 24 of those 32 years. The results are a ruined energy system, prospects for significant tax increases, and an educational system that doesn't know which bathrooms its students should be using.

TORONTO - Loblaw has added its voice to the companies who suggest that minimum wage increases may wind up hurting, rather than helping, some workers.

Loblaw Companies Ltd. said Wednesday that changes to the minimum wage in Ontario and Alberta will increase their labour expenses by $190 million in 2018.

How to make up that loss?

Loblaw chairman and CEO Galen G. Weston said the company would move to save money by, “increasingly digitizing manual invoice jobs and rolling out more self-checkouts at its Shoppers Drug Mart locations.”

In other words, via technology — and savings achieved through technology usually involves job cuts.

In the U.S., minimum wage hikes and consequent increased labour costs were offset in the fast-food industry by automation — kiosks replacing cashiers in McDonald’s, for example.

The minimum wage in Ontario and in Alberta is going to $15 an hour.

In Ontario, it is currently $11.40 an hour and will rise to $14 in 2018 and then $15 in 2019. Alberta will have a $15 minimum hourly wage by next year.

One obvious way to cover off higher labour costs is with price increases, although the rising cost of groceries has already been problematic for many Canadians. (Besides grocery stores, Loblaw owns Joe Fresh clothing stores, Shoppers Drug Mart and PC Financial.)

Nonetheless, a CIBC analysis put forward by Global News states that an increase of only 0.4 per cent would offset Loblaw’s increased labour costs.

Luckily for the consumer, the current retail environment — with such developments as Amazon hoping to acquire Whole Foods — may prevent any such price jumps for now.

“We have many cost levers and will be looking at every one. In terms of grocery prices, we continue to work hard to keep prices low in a very competitive environment. That focus has not changed.”

The company website claims that Canadians make one billion visits a year to the company’s stores; it also says that Loblaw employs some 200,000 Canadians, coast to coast.

The higher cost of labour came up in a report showing a second-quarter profit attributable to shareholders of $358 million or 89 cents per diluted share — quite a jump over a profit of $158 million or 39 cents per diluted share for the same period a year ago.

'GREED' OR NEED?

Canadian companies complaining that raising the minimum wage will hurt profits?

Some chalk it up to “corporate greed,” while others say the entire issue is being overblown.

Loblaws was the latest to get on the anti-minimum wage raise bandwagon, suggesting on Wednesday a wage hike could force the company to find cost-savings elsewhere, possibly through automation.

The province is looking at boosting the minimum wage from the current $11.40 an hour to $15 by 2019.

“They are threatened by any loss. It’s just corporate greed and immoral in every way,” Cheeba Cole said on Wednesday outside the Danforth and Broadview Aves. grocery store.

“This is about survival for some people. Why can’t they look at their employees as human beings,” Cole added.

Companies such as Loblaws are saying a raise in minimum wage will hurt profits and increase the costs of their goods.

Doug Fyfe said forecasts of corporate ruin because of a minimum wage increase never come to be.

“There has always been a history of protests against minimum wage increases and in the end when workers get a wage increase it turns out to be good for the economy,” Fyfe said.

Loblaw shopper Suzy Thomson, who was with her two-year-old boy and four-year-old girl, doesn’t believe the average person is against raising the minimum wage, although she worries about her food bill.

“It’s already outrageous feeding two little ones with the cost of milk and produce. Prices are already too high,” she said. “People don’t begrudge a raise in minimum wages, but I don’t know what will happen.”

Anne Lamont has kids paying off their educations working in minimum wage jobs that aren’t in their field of studies.

“Young people are facing such challenges and I think the companies should absorb the costs of a minimum wage increase,” Lamont said.

“The money will go back into the economy. It’s a long-term investment in our labour force and our future.”

We already know this is in the future anyway, and this increase in the minimum wage will only give that a kick-start. There are robots that fill shelves, for instance, and when it's going to cost you $190 million a year more, wouldn't any prudent manager explore the possibilities?

Think of it this way ... if it cost $500 million to retrofit all your stores, and your savings on shelf-stocking and warehouse people was $60 million a year, you'd have a nine-year payback! If this, and other measures, saved the whole $190 million, it'd give them a three-year payback

I hate to reveal my age, but I grew up in a time when the minimum wage, if it existed, was so low that it wasn't affecting anything. There were all kinds of ways to earn a nickel -- delivering papers, working at food stores packing groceries, baby-sitting, pumping gas etc. It was a world of opportunity. In a sense, it gave 12 year olds a work ethic. If you were a customer, you would not expect to fill your own gas tank, and while the attendant was waiting for the tank to fill he might wash your windshield and inquire about your oil, in case you wanted it checked. When you went to the Dominion Store, a kid would likely be on hand to pack your bags and carry them out to your car. That economy positively dripped with customer service. People would go downtown shopping at Eaton's and Simpson's and have them deliver your purchases to your home.

Up to 185,000 jobs could be put at risk if Ontario’s Liberal government keeps its pledge to increase the minimum wage to $15.

Those are the findings of an “independent assessment” of Bill 148, the Liberal’s Fair Workplaces Better Jobs Act. The bill will hike the minimum wage — currently set to rise with inflation from $11.40 an hour to $11.60 in October, up to $14 on Jan. 1, 2018, and $15 the following year.

But the according to a study commissioned by Ontario’s Chamber of Commerce, the bill will put jobs at risk and have “dramatic unintended consequences.” Chamber vice- president Karl Baldauf said the province needs to slow down and amend its legislation.

“Should the government move forward with these vast, unprecedented reforms, there will be significant, sudden and sizable uncertainty for jobs and economic growth in Ontario,” he said. The report also says that Ontario businesses will see a $23 billion “hit” over the next two years because of the legislation. While the changes won’t cause mass layoffs, they will kill job growth, said Paul Smetanin, president of the Canadian Centre for Economic Analysis, which conducted the study.

“The results are not sensationalized,” Smetanin said. “We have been conservative in adopting what literature suggests. It pains us to have to deliver such a message.”

The report also estimates there will be costs for the Ontario government itself. Increased costs associated with the bill will add $440 million in debt to the province’s treasury.

“As I go from community to community, the thing that I’m hearing over and over again is that these changes are all too much too fast,” he said.

Labour Minister Kevin Flynn said the government will review the findings the report. It’s one of a “long list” of studies on the topic, he added.

“We recognize there are concerns from the business community,” he said in a statement. “We’ve worked hard to make sure Ontario’s business climate is competitive, and we are committed to working with the business community to bring forward initiatives that will improve our competitiveness even more.

That being said, we will not back down from our plan to bring fairness to Ontarians.”

Progressive Conservative labour critic John Yakabuski said the Liberal government needs to conduct its own economic impact study of the new bill.

“It’ll be a tragedy if all of these 185,000 people are put out of work,” Yakabuski said in a statement. “A higher minimum wage doesn’t help if Ontarians don’t have a job to wake up to in the morning.”

An economic analysis of proposed labour law changes including a $15-an-hour minimum wage confirms that small businesses are going to get hit hard, the Canadian Federation of Independent Business (CFIB) says.

Julie Kwiecinski, the CFIB’s director of provincial affairs in Ontario, said its own member survey shows that one-third are considering shutting down or moving in response to the mandatory wage hikes beginning with a $14-an-hour minimum on Jan. 1.

“Unfortunately, we have felt and seen the government do their eye rolls at us... not believing what we were saying in our survey,” Kwiecinski said Monday. “They’re scared, they’re worried that this is actually going to start taking effect on Jan. 1.”

A report prepared by the Canadian Centre for Economic Analysis (CANCEA), on behalf of the Ontario Chamber of Commerce and the Keep Ontario Working Coalition, says small businesses are five times more likely to be impacted by the new provincial labour legislation than large companies.

The government bill goes before a committee next week when MPPs will have the chance to introduce amendments, she said.

“If people think it’s bad now, it could get worse in terms of the cost to business and jobs when the whole process is said and done,” Kwiecinski said.

The Ontario Federation of Labour (OFL) issued a statement Monday dismissing the findings of the CANCEA analysis as “inaccurate, incomplete and just not responsible.”

The “corporate lobby” analysis fails to consider economic benefits to raising the minimum wage such as higher consumer spending and reduced demand on social services, the OFL statement says.

Peer-reviewed economic research has found that contrary to the report’s claim that 185,000 jobs are at risk, increases in minimum wage have “very small, if any impacts” on employment levels, the statement says.

CANCEA said in its report that it is independent and does not accept any research funding that requires a pre-determined result or policy stance.

What chutzpah! Would she have the nerve to just let it die and hope nobody would notice?

Another sleazy bit of abuse of the public purse, this time used to buy my vote, and I gotta say it's way more valuable than anything else this government has done for me -- admittedly, I am a white male -- in the past dozen years. It's my hydro bill. They have contrived to take my hydro bill from $100 a month -- I am a light user -- down to the point where this month it was $10! Part of it is due to my living in a rural area, but jayzuz, I don't want to cost myself $90 a month just to vote my conscience!

What chutzpah! Would she have the nerve to just let it die and hope nobody would notice?

It may simply be a procedural thing and could move forward with the January 1st 2018 date; However the consideration has to be made that employers need time to make the changes.

Generally speaking Minimum Wage increases due to inflation (for the regions that use that formula) are usually made known a year or so out.

I don't believe that Bill 148 has gone to second reading and I am not sure how long it will stay in committee, be debated, and if passed received royal assent. however passing the legislation in October with an expectation of a change January 1st seems tight and later than that seem irresponsible.

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